All good businesses should review and renew regularly, to ensure that they are operating efficiently, cutting costs and maximising potential.
The following checklist is not exhaustive but is a good start for a healthy new year audit of your business:
- Is your business structure the most appropriate for your needs – do you have the most effective asset protection structure in place? Are you maximising tax benefits? Should you have a trust ownership structure? If you have a family trust, are you up to date about whether this offers you adequate asset protection? If you are incorporated, are you fully aware of your obligations and potential exposure as a director ?
- What if something happens to you – do you have Powers of Attorney so that the appropriate people will make management decisions in your absence? Does your business plan offer certainty should an untimely event occur, and does it allow the appropriate people to manage the business if you are temporarily incapacitated, with minimal interference to your operation and cash flow? Do you have a Will? Who will take control, and benefit in the growth of your business, after your death? Do you know what assets and liabilities will form part of your estate (and therefore be dealt with in your Will)? Are you aware that superannuation does not automatically form part of your estate and may instead be distributed at the discretion of your fund’s trustee? This may mean that money which you planned to be available for business debts (or protected from business debts) will not be so.
- Should you have a Self Managed Super Fund – the advantages are that you will have greater control over your investments and a wider choice of assets in which to invest, however you need to ensure that the administrative costs are not going to outweigh the benefits. If you have one, you need to be vigilant about complying with legislative requirements (such as the sole purpose test of saving for your retirement) or you will attract penalties.
- Do you own or lease? Is your lease value for money, is it energy efficient? Is the landlord conducting appropriate renovations and repairs? Are you complying with your lease obligations? Have you allowed your business premises lease to lapse, putting you into a “holding over” arrangement? If so, you are at risk of eviction. If you own your premises, is ownership the most effective structure for you?
- Are you owed lots of money? – and should you be taking steps to recover outstanding debts? Have you got efficient systems in place to chase your debtors? Have you got strategies to ensure that you are most likely to be paid. For example, you can have your customers sign payment agreements once a quote has been accepted which could include provision for up front payment, or payment of a deposit. Service contracts also provide certainty about the service that you will be providing, what is included in the price and what will attract additional costs. Pursuing outstanding debts through the Court system can be managed effectively and efficiently on your behalf when customers refuse to pay, but having the correct systems up front in order to secure payment in the first place is even more efficient.
- What shape are your borrowings in? – do you have the best deal for your finance arrangements, the best rates and the best flexibility? Can you consolidate your borrowings? Is your bank aware of exactly what your business does, allowing it to tailor its services to your needs.
- Conduct a review of your employment contracts, your consultant contracts and your supplier contracts – these may be outdated, and employment contracts in particular may not comply with current legislation. If you don’t have employment contracts in place this should be remedied. Or you may be inadvertently breaching the ones that you have. Your suppliers should be complying with their obligations to you which may include extra services on the side or discounts for certain levels of purchasing.
These are some key areas you should assess as part of your new year audit, and seek appropriate and skilled advice.
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